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This commentary is intended for general informational purposes only and does not constitute investment advice or a recommendation.
In August, Auspice launched the Auspice U.S. Equity Plus Trend Index (“AUSEPTI” or the “Index”), the first published active return-stacking index1 to be calculated and disseminated by the NYSE. Using the same concept as our Canadian alternative mutual fund, the Auspice One Fund Trust (“One Fund”), the Index overlays traditional U.S. large-cap equity exposure with a managed futures trend-following strategy, all with the same invested dollar. The trend strategy is designed to add a second, historically less correlated source of potential return.
The intended result is an enhanced approach to S&P 500 exposure: the return of the equity market plus the return of the trend strategy. In October, our longtime partners at New York-based Direxion launched the Direxion U.S. 500 Plus ETF (NYSE: SPXP), which seeks to track AUSEPTI.
How The Index Works
The Index stacks two return streams, each with long track records, on the same capital:
Equity market exposure through a continuously rolled position in CME E-mini S&P 500 futures (ES), sized at 100% of the Index’s notional.
Systematic trend-following exposure through the Auspice Managed Futures Excess Return Index (AMFERI), sized at 100% of the Index’s notional. AMFERI takes long or short positions across a diversified set of commodity and financial futures, and has been calculated and published by the NYSE since December 2010.
Both exposures are held through futures, which together give the Index an effective notional exposure of 200%, while the capital itself is free to be held as collateral, earning the U.S. 13-week Treasury bill rate on 100% of the Index’s notional.
On the 10th business day of each month, the Index rebalances back to 100% equity, 100% trend and 100% T-bills. In March, June, September and December, this is also when the ES position rolls to the next contract. Each new composition is published the day before it takes effect.
In short, the Index delivers a levered-equivalent total return reflecting the full gains and losses of both the equity and trend-following components, each sized at 100% of the Index’s notional.
Why Build and Publish an Index?
Building the strategy as an index gives the ETF a published, rules-based benchmark to track. The Index is the strategy itself, so the ETF seeks to track it before fees and expenses. Its returns may differ from the Index. In our view, any difference not explained by fees, expenses and trading costs would be a red flag.
Auspice was the first active CTA globally to launch an ETF2. In 2008 we published a natural gas index based on Canadian “AECO” gas, and the GAS ETF followed on the TSX. Two years later we began publishing two of our core strategies as indices, the Auspice Broad Commodity Index and the Auspice Managed Futures Index. They have been used by ETFs, funds and institutional SMAs in Canada and the U.S., including the COM ETF on the NYSE and the CCOM ETF on the TSX, which track the Auspice Broad Commodity Index. We believe sixteen years of NYSE publication and over C$7003 million in those two ETFs reflect confidence in the reliability of the indices.
Portable Alpha by Another Name
Return stacking has plenty of evangelists today, but the idea is not new. PIMCO pioneered portable alpha in the 1980s, Ontario Teachers' Pension Plan adopted it in 1995, and many institutional investors have followed. Managers such as Millburn have been at it for some time, and our One Fund, launched in 2020 (and offered publicly since 2023), predates most retail offerings. For the history and sources, see our Return Stacking and Portable Alpha Investor’s Guide (August 2025).
Return stacking seeks to provide access to multiple return drivers without reducing core exposures. It works because futures require only a fraction of their notional value as margin, so one dollar of capital can carry a futures position and still sit in cash-like collateral. In a traditional 60/40 portfolio, adding an alternative sleeve means taking capital from equities or fixed income (the 50/30/20 bar in Chart 1). Instead, investors can keep the full 60/40 and place the 20% trend exposure on top using futures (the right-hand bar), which is 120% notional exposure on 100% of the capital. More exposure also means more risk. See the “No Panacea” section below.
Chart 1 · Making room vs. stacking
Return Stacking in a Portfolio
Portfolio exposure as a share of capital invested.
Illustrative exposures only; not actual or simulated performance of any index or Auspice product.
The case for holding more managed futures isn't new either. We published a white paper in 2022, What is the Optimal Allocation to CTAs?, which found the mathematical answer to be 50% to 60% of the portfolio and a more practical answer to be 10% to 25%. We repeated the exercise for Chart 2, using June 2007 to September 2026, and the mathematical answer was again roughly half the portfolio. In that hypothetical back-test, moving just under half of a 60/40 portfolio into the Auspice Managed Futures Index kept the return near 8% while cutting volatility from 9.9% to 6.4% and the worst drawdown from 33% to 8%. Yet, in our experience, few investors go near that.
In our view, the line-item lens tends to hold allocations to 5–10%, where the effect is small. At 10%, the worst drawdown only falls from 33% to 26% in the same back-test. That creates a negative feedback loop. The allocation is too small to protect the portfolio when it matters, but big enough to stand out as a laggard on the statement, so it often is cut before it can do its job.
Chart 2 · Optimal vs. typical allocation
Adding Managed Futures to a 60/40 Portfolio
That gap between what the math calls for and what investors will actually hold is line-item, or statement, risk. Return stacking may help to reduce it.
Overcoming Line-Item Risk
Chart 3 · Overcoming line-item risk
Held as a Line Item
Many investors analyze their portfolios line by line and may abandon diversifiers during temporary underperformance (often versus equity benchmarks). Chart 3 shows why. Held as a separate line since 2000 (back-tested before December 2010), the Auspice Managed Futures Index (AMF) trailed the S&P 500 by about 10 points a year in equity bull markets (6.9% vs. 16.8%), and those were 81% of all months. In the bear markets, the other 19%, it gained 20.9% a year while the S&P 500 lost 20.9%. Over the full period AMF returned more than equities (9.5% vs. 8.3%), yet most of the time it looked like the reason the portfolio was lagging.
Living through that is harder than the averages suggest. From December 2012 to March 2022, its trailing three-year return was behind the S&P 500’s every single month. Even in 2021, when it returned 26%, it still trailed the S&P 500’s 29%. Over a stretch like that, the pressure builds from several directions. Money tends to chase what’s working, and in a bull market that is equities. Clients see one line far ahead of the other, and at every review the advisor fields the same question: “Why do we own this?” And the longer the rally runs, the more distant the last bear market feels, until it becomes easy to believe this time is different. The cost shows up on every statement. The payoff comes rarely and without warning.
None of that is in the math, but all of it pushes toward the same decision, which is to sell the laggard after the equity bull run, just before the bear market it was bought for. In 2022, the S&P 500 fell 18% and AMF gained 11%, and the conversation turned to “Wish we owned it.”
Chart 4 · Overcoming line-item risk
Held Stacked
Chart 4 holds the same two return streams as Chart 3. Instead of two lines on a statement, with the diversifier measured against equities, the investor is able to view the alternative from a total portfolio perspective. Trend following’s gains in bull markets no longer show up as 10 points of lag. They show up on top of the equity return. The stacked index (AUSEPTI) returned 21.8% a year in bull markets versus 16.8% for the S&P 500, lost 6.5% a year in bear markets versus 20.9%, and returned 15.7% a year over the full period versus 8.3%. The diversifier stops being judged in isolation, and the investor may be better able to act on the math instead of the statement.
Note: These AUSEPTI index figures are hypothetical back-tested results, and past performance does not guarantee future results. Please see the Important Disclaimers and Notes below.
No Panacea
Nothing is a panacea, in life or investing. There is a definite risk that both the components lose value at the same time thus exacerbating the equity beta loss.
However, we believe the following:
Robust and Reliable: Auspice Managed Futures Index has a 16-year track record, while the S&P 500 has been live since 1957. Trend following has historically produced returns that differ from equities, but there is no assurance this will continue.
Returns Enhancement: For investors prioritizing returns over diversification benefits, return-stacking portfolios such as the SPXP ETF may be more cash efficient, with greater market exposure and risk.
Equity Replacement: Different profile vs pure equity beta. For every dollar invested, you get $1 of the S&P 500, and $1 of Auspice Managed Futures Index. Two for one.
Institutional Solution: Auspice has long employed overlay and portable alpha for pensions. The Direxion U.S. 500 Plus ETF seeks to provide institutional-style diversification in a single trade.
Industry First: The first published active return-stacking index calculated and disseminated by the NYSE.
IMPORTANT DISCLAIMERS AND NOTES
There is a substantial risk of loss in trading futures and options. Past performance is not necessarily indicative of future results. The views expressed are those of the author and do not constitute investment advice.
The views expressed above reflect our current interpretation of market conditions and economic history and may change as new information becomes available.
Commissions, trailing commissions, management fees and expenses may all be associated with investment funds. Please read the prospectus or applicable offering document before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.
All data is believed to be reliable but has not been independently verified.
Auspice created the Auspice U.S. Equity Plus Trend Index (AUSEPTI), receives compensation in connection with the index and is therefore not independent of the Direxion U.S. 500 Plus ETF (SPXP), which seeks to track it. Auspice does not offer or sell SPXP. SPXP charges fees and expenses that will reduce its returns relative to the index, and its returns may differ from the index. Please read the SPXP prospectus before investing
The indices shown (Charts 2 to 4) are for illustrative purposes only. Index returns do not reflect the deduction of fees, expenses or transaction costs. Past performance is not indicative of future results. The referenced indices are not directly investable. Also, where ETF or index proxies are used, they are intended to approximate the performance of the underlying strategy and may not reflect actual investable results.
These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.
Index Definitions:
The Auspice U.S. Equity Plus Trend Index (AUSEPTI) combines a continuously rolled long position in CME E-mini S&P 500 futures (100% of notional), the Auspice Managed Futures Excess Return Index (AMFERI, 100% of notional) and the U.S. Treasury 13-week T-bill rate as the cash collateral return, rebalanced monthly on the 10th business day. The index launch date is August 17, 2026. Values prior to the launch date are hypothetical back-tested performance, not actual performance, and reflect application of the methodology with the benefit of hindsight.
Returns for the Auspice Managed Futures Index (AMF), shown as the Total Return Index in Charts 2 and 3, and the Auspice Managed Futures Excess/Total Return Index (AMFERI/AMFTRI) represent returns calculated and published by the NYSE since December 2010. Values prior to December 2010 are hypothetical back-tested performance. The index does not have commissions, management/incentive fees or operating expenses. Excess Return (ER) does not include collateral return whereas Total Return (TR) includes collateral return.
The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. Total return data is used (including dividends).
The Bloomberg US Aggregate Bond Index is a broad-based, market capitalization-weighted bond market index representing intermediate-term investment grade bonds traded in the United States. Total return data is used (including distributions).
The 60/40 portfolio is 60% S&P 500 Total Return Index and 40% Bloomberg US Aggregate Bond Index.
These materials are provided for informational and educational purposes and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting and tax. Please consult with your own professional advisor on your particular circumstances.
Futures trading is speculative and is not suitable for all customers. Past results are not necessarily indicative of future results. This document is for information purposes only and should not be construed as an offer, recommendation or solicitation to conclude a transaction and should not be treated as giving investment advice. Auspice Capital Advisors Ltd. (the “Manager” or “Auspice”) makes no representation or warranty relating to any information herein, which is derived from independent sources. No securities regulatory authority has expressed an opinion about the securities offered herein and it is an offence to claim otherwise. Please read the applicable offering documents before investing.
This material may contain forward-looking statements, which were prepared for the purpose of providing general educational background information and may not be appropriate for other purposes. Certain statements in this document are forward- looking statements, including those identified by the expressions “anticipate”, “believe”, “plan”, “estimate”, “expect”, “intend”, “target”, “seek”, “will” and similar expressions to the extent they relate to an Auspice managed investment fund (the “Fund”), where applicable, and the Manager. Forward- looking statements are not purely historical facts but reflect the current expectations of the Fund, where applicable, and the Manager regarding future results or events. Such forward-looking statements reflect the Fund’s, where applicable, and the Manager’s current, reasonable beliefs and are based on information currently available to them. Forward-looking statements are made with assumptions and involve significant risks and uncertainties. Although the forward-looking statements contained in this document are based upon assumptions that the Fund, where applicable, and the Manager believe to be reasonable, neither the Fund, where applicable, or the Manager can assure investors that actual results will be consistent with these forward-looking statements. There is no guarantee that any forward-looking statement will come to pass. As a result, readers are cautioned not to place undue reliance on these statements as a number of factors could cause actual results or events to differ materially from current expectations.
Neither the Fund, where applicable, nor the Manager assumes any obligation to update or revise any forward-looking statement to reflect new events or circumstances, except as required by law.
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